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In 1901, Prohibition began in Canada through a provincial legislation in Prince Edward Island. In 1916, prohibition was instituted in Ontario as well, affecting all 64 breweries in the province. Although some provinces totally banned alcohol manufacture, some permitted production for export to the United States. Labatt survived by producing full strength beer for export south of the border and by introducing two "temperance ales" with less than two per cent alcohol for sale in Ontario. However, the Canadian beer industry suffered a second blow when Prohibition began in the U.S. in 1919. When Prohibition was repealed in Ontario in 1926, just 15 breweries remained and only Labatt retained its original management. This resulted in a strengthened industry position. In 1945 Labatt became a publicly traded company with the issuance of 900,000 shares.

John and Hugh Labatt, grandsons of founder John K. Labatt, launched Labatt 50 in 1950 to commemorate 50 years of partnership. The first light ale introduced in Canada, Labatt 50 was Canada’s best-selling beer until 1979.

In 1951, Labatt launched its Pilsener Lager; when it was introduced in Manitoba, the beer was nicknamed "Blue" for the colour of its label and the company's support of Winnipeg's Canadian Football League (CFL) franchise, the Blue Bombers. The nickname stuck and in 1979 Labatt Blue claimed top spot in the Canadian beer market. It lost this status in the late eighties to Molson Canadian, but over the next decade, periodically regained top spot as consumer preferences fluctuated. In 2004, Budweiser took the top spot, pushing Blue to third for the first time in twenty-five years.[1][2] However, since Labatt has brewed Budweiser (and other Anheuser-Busch products) in Canada under licence since the 1980s,[3] Labatt likely did not suffer from this shift. Moreover, Labatt Blue remains the best selling Canadian beer in the world based upon worldwide sales.[4]

Labatt was also the majority owner of the Toronto Blue Jays from their inception in 1976 until 1995, when Interbrew purchased Labatt.

Labatt's innovations include the introduction of the first twist-off cap on a refillable bottle in 1984. In 1989, Labatt's had the opportunity to hire Canadian model Pamela Anderson as a Labatt's Blue Zone Girl after she was picked out of the crowd by a TV camera man at a BC Lions football game wearing a Blue Zone crop-top. Photographer and boyfriend, Dann Ilicic, produced the Blue Zone Girl poster on his own after Labatt's refused to have anything to do with it. Later, Labatt's did buy 1000 posters to deal with consumer demand.

In 1995, Labatt was acquired by the large Belgian multinational brewer InBev (then Interbrew), the world market leader.

In 2009, the company sold Labatt USA, including the American rights to its core Labatt products (such as Blue, Blue Light, and Labatt 50) to North American Breweries, and agreed to brew those brands on Labatt USA's behalf until 2012. This sale was mandated by the U.S. Department of Justice for competitive reasons following InBev's merger with Anheuser-Busch, since Budweiser and Labatt Blue were both among the top brands in upstate New York, despite the latter having less than 1% market share in the U.S. overall.[5]

The sale did not include U.S. rights to Labatt products not carrying the "Labatt" label, such as Kokanee or Alexander Keith's, which are now distributed in the U.S. by Anheuser-Busch.[6] Moreover, the underlying intellectual property (such as the Labatt trademarks) remains the property of the Canadian firm. Finally, the sale did not affect Labatt's Canadian operations in any way; Anheuser-Busch InBev retains full control of the Labatt brand portfolio within Canada.

According to a report by Beer Marketer's Insights and published by USA Today on December 9, 2013, sales of Labatt Blue declined by 28.3% between 2007 and 2012. The article listed Labatt Blue as one of "nine beers many Americans no longer drink."[7]

Labatt’s US headquarters were originally located in Buffalo for some years. Labatt then decided to relocate their headquarters to Norwalk, Connecticut for a time. In 2007 Labatt decided to relocate their US operations back to Buffalo due to strong sales in the city and closer proximity to their Ontario operations. Labatt USA is now owned by North American Breweries of Rochester, NY.

Labatt's Toronto brewery ceased operations in 2006 and was demolished by 2007, thus ending the brewery's ties to the city.

Labatt 50 is a 5% abvBlonde ale[8] launched in 1950 to commemorate 50 years of partnership between the grandson of the brewer's founder. The first light-tasting ale introduced in Canada, Labatt 50 was Canada’s best-selling beer until 1979 when, with the increasing popularity of lagers, it was surpassed by Labatt Blue. Labatt 50 is fermented using a special ale yeast, in use at Labatt since 1933.

Labatt Blue is a 5% abvpale lager.[9] There are 11.53 US fluid ounces (341 ml) of beer in a bottle of Labatt Blue. There are 355mL of beer in a standard can of Labatt Blue/Bleue in Canada with other volumes available in specific regions of the country.

Since Labatt Blue became Canada’s best–selling beer, the company’s flagship brand has entered in a number of international beer ratings competitions and has always performed notably well. In 2003, Labatt Blue received a Gold Quality Award at the World Quality Selections, organized yearly by Monde Selection.[10]

Labatt Blue is sold in all provinces of Canada (most of the United States sells Labatt with sales particularly strong in the Midwest and Northeast along the Canadian border), although in Quebec it is sold under the name Labatt Bleue, with a slightly different logo. Aside from the name, and containing 4.9% alcohol/volume instead of 5.0%, the red maple leaf on the logo has also been changed to a red fleur-de-lis. The business sponsored Nottingham Forest F.C. from 1992 (interchanging with Shipstones Brewery until 1994) to 1997.[15]